Triple Play 3 reasons why troubles in the retail sector will ripple throughout N.J.

Lee Holtzman is a Newark-based partner at McCarter & English, where he represents commercial real estate owners on property tax appeals, and is a member of the New Jersey Supreme Court Committee on Taxation.We asked Lee to give us three reasons why troubles in the brick-and-mortar retail sector will have ripple effects throughout the state.

Although the overall number of tax appeals filed statewide this year decreased, we saw anecdotally but clearly that appeals in the retail subsector remained robust, and we anticipate a sharp increase in retail-related appeals during the next few years. Owners of retail space see their tenants suffering economically, requesting rent reductions or prematurely vacating leased premises.

For a variety of reasons — trying to bolster their municipalities’ finances primary among them — tax assessors are generally slow to lower assessments in struggling subsectors, making those asset classes ripe for appeal.

The decline in value of retail space — along with office space — should continue. We’re carefully watching values in multifamily housing, where valuations remain strong but where rent concessions and stagnation could be the first signs of an oversaturated market and more appeals.